Foley creates fund to invest in clients

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The law firm Foley & Lardner has discovered a new way to inspire confidence in its clients — by investing in them.

The firm recently raised $2.6 million from its partners to invest in the emerging technology and startup companies it represents.

Through the venture capital program, called Foley Ventures Fund, the firm has raised $6.6 million in two funding periods and invested in 32 clients.

"It gives us an opportunity to participate, in a relatively minor way, in our clients' businesses," said Richard Kaufman, a Foley & Lardner partner in San Diego and vice chair of the firm's private equity and venture capital practice. "It's interesting to us from a subject matter standpoint, and we're indirectly sharing in their success.

"As lawyers, we always have a stake in our clients' success. This further aligns us with their success."

The development of the Foley Ventures Fund is a direct result of the firm’s venture capital and private equity experience and insight gained through working with many funds and emerging growth companies.

The firm’s partners recognized that clients need more than legal insights to succeed and funded Foley Ventures Funds I and II to invest alongside them.

"They [firm attorneys] have the opportunity to refer their clients to the Foley Fund," said Gabor Garai, chair of the firm’s private equity and venture capital practice. "And it also is a way that we can show to our clients that we can really put our money where our mouth is, and we believe in whatever they're doing."

Foley attorneys across all practice areas, ranging from intellectual property to government regulations, in any U.S. or international office, are free to submit qualified investment opportunities regardless of whether they invested in Foley Ventures. This provides the fund with an extensive and diverse deal flow.

Foley Ventures funds are designed to simplify the investment process. When an attorney is working with a venture fund client, Foley Ventures will invest in a portfolio company, which is projected to have adequate cash flow after the investment, for at least one year.

For startup or emerging companies, the fund will invest if the company receives a simultaneous investment from a professionally managed venture fund or angel group, and if adequate cash flow for one year is projected.

Foley Ventures Fund II also allows for investment in other venture capital or private equity funds that are managed or sponsored by clients.

"It's not a source of funds for them in the sense of relative dollars," Garai said. "It does not make or break clients' business success, but it's significant enough that they will see we are players in the same ecosystem they play in."

The Foley partners have greeted the program enthusiastically, as witnessed by the contributions.

"It demonstrates our comfort in being in the emerging company space," Kaufman said. "We're talking about investing in the fund and not in some Fortune 500 or blue chip companies. It demonstrates a commitment to the emerging company space."

One company that Foley Ventures has invested in has already gone public. Kythera Biopharmaceuticals Inc. (Nasdaq: KYTH) went public in November 2012 and recently held its first liquidity event.